India's first 50-year bond fully sold on growing insurer demand

India’s auction of the debut 50-year bond met with firm demand Friday, underscoring growing interest from insurance and pension funds for ultra-long papers.

The government sold 100 billion rupees ($1.2 billion) of the 2073 bond at a cutoff yield of 7.46%, the Reserve Bank of India said in a statement. That’s lower than the 7.48% forecast in a Bloomberg survey. Investors, including insurers, probably lapped up the paper as they had expressed strong interest before the auction to lock in higher yields to take care of long-term commitments.

The nation’s burgeoning life insurance and pension fund industries, driven by an expanding middle class, are changing the landscape for India’s $1 trillion sovereign debt market. India’s yield curve has been nearly flat even amid record borrowing by the government as insurers stepped up purchases of long-term bonds.

Issuance of long-term paper was a very specific demand that has was being made to RBI for a long time, said Umesh Tulsyan, managing director at Sovereign Global Markets in Delhi. “If the response is good, RBI will definitely continue offering papers in the ultra-long segment.”


The sale of long-term bonds may help the government elongate the tenure of debt sold and keep its interest costs under control. Today’s cutoff came in lower than 7.54% yield for the 40-year paper auctioned last week.

The government plans to sell 300 billion rupees of the 50-year bond in the October to February period.

Over one-third of the government’s fiscal second-half bond supply is in papers maturing in 30-50 years. The Reserve Bank of India in September said it plans to add the 50-year bond in response to market demand for ultra-long papers, extending the nation’s yield curve.